“I haven’t talked about options for a long time. In the past two months, the market has gone from a sustained surge to a recent shock. Mr. Frog’s option positions have changed from bull market spreads to single-leg subscriptions. Both times have been half a beat slower, resulting in the advantage of holding options. (Loss less, win more) The gap is much smaller than holding spot.
Holding a single leg or bull spread often requires position adjustment due to the non-linearity of options. Is there a more worry-free operation to make a grid? The answer is yes, it is the synthetic long strategy. Let Linwa talk about it below.
The previous option article also mentioned that the bull market spread strategy is very critical to deal with the surge, and buying the legs makes a profit. Whether the timing of moving a position or closing a position before re-establishing a position is well grasped will significantly affect subsequent returns. Similarly, if it is too aggressive, the time value of the position after adjustment will be very obvious. This will greatly reduce the income.
Brother Frog’s operation was like this. The surge lasted for more than a month, and there was basically no correction. In a completely strong bull environment, his operation was still a bullish spread and then moved. position; later I figured it out, removed the selling leg, appropriately moved the buying and holding positions and added positions, which can be regarded as catching the tail of the last wave of rise; but after entering July, the target obviously could not rise, although it did not fall either. How much, but it is obvious that the single-leg purchase fell significantly when it could not rise, which also led to increased losses. In the end, when the grid transaction was reduced by one grid, the loss of the long position in the option originally only accounted for the underlying. The loss is less than half, and now it only accounts for 82% of the underlying loss, completely losing the advantage of options to lose less and win more.
Therefore, for investors who have a general sense of the market or don’t have much time to watch the market. , instead of passively adjusting positions and continuously contributing handling fees, it is better to reduce such adjustments in basic positions in order to conduct grid trading more intuitively.
Synthetic long position is actually a combination of a buy call right position and a sell put obligation position with the same option price in the same month to form a set of strategies to achieve the same rise and fall asset performance as spot prices.
It can be seen from the profit and loss chart that such a combination achieves exactly the same rise and fall profit and loss of the target, transforming the non-linear expression of the option into a linear expression of the same target, but the funds it occupies are selected in the furthest month. The at-the-money contract in December only costs more than 7,000 yuan, accounting for only 1/4 of the actual target price of 30,000 yuan. It achieves effective leverage and no longer exists when operating the grid under the synthetic long strategy linear assets. Under single-leg subscription or bull market spread operations, the grid effect is greatly reduced due to its non-linear changes.
If the strategy is further optimized, the synthetic long combination represents the spot, which is actually issued at the corresponding high strike price. If the equal share of the option obligation position is subscribed, the same effect of opening a covered position will be achieved. For such a bull three-legged combination, because the subscription side can form a bull market spread combination, the margin will be reduced, or the put obligation position may be subscribed to form a double-sell combination and the margin will be reduced by half. The actual capital occupation of left and right margins is similar to that of synthetic long positions. It can also increase part of the premium income when the target goes sideways or falls, enhancing the income of the entire long portfolio.
In fact, the change in the entire strategy is somewhat similar to adjusting the original relatively high-frequency short-term operations to low-frequency mid- and long-term operations to reduce the impact of daily fluctuations and better reflect the investment philosophy of long-term ETF holdings.
My suggestion to Brother Frog is that the two can still be combined appropriately. In the medium and long term, on the basis of synthetic long positions, you can choose to sell contracts with higher exercise prices and subscribe in closer months. The margin cannot be reduced or reduced for different month strategies. You can only sacrifice an extra part of the margin, but you can earn time value faster; and In the short term, once the trend is clear for a long or short situation, you can add some single-leg rights positions in recent months, make full use of the non-linear option characteristics, and admit defeat in time to stop the loss if things go wrong.
That’s it for today, please give your support to “Frogs Crying as a Family”!